Regulatory changes for the broking industry have been rigorous but will make it stronger in the long run, says Ravi Kumar, co-founder and CEO of Upstox in an interview with Business Standard.
He further added that brokerage rates in India are currently among the lowest, and it may be necessary to re-evaluate them. If circumstances warrant, we could consider adjusting the brokerage rate at an appropriate time in the future, stated the expert.
"The recently introduced regulations are more rigorous and emphasise the significance of compliance. While regulatory modifications may temporarily affect revenue, they ultimately contribute to the establishment of trust and bolster investor confidence in the medium to long term. This is particularly beneficial for mass retail businesses like ours," said Kumar.
Commenting on the decline in Demat account additions, Kumar told BS that Demat accounts have registered a notable 31 percent increase compared to the same period the previous year when the total was 84 million. Although these figures are promising, there is still a significant gap to address. With a population of over 1.4 billion, only a small portion of Indians are currently investing, he pointed out.
"Various factors contributed to the decline in retail participation last year, including continuous rate hikes by central banks globally, the Russia-Ukraine conflict, enduring inflation, and the banking crisis in the developed world, all of which led to market volatility that discouraged investors," explained Kumar. However, he maintains an exceedingly optimistic outlook for the long-term prospects of equity markets. The steady growth in Demat accounts signifies a bullish sentiment towards the markets, he added.
The expert also highlighted that the impact of an increase in securities transaction tax (STT) on trading volumes would depend on various factors, such as the prevailing market conditions and investor behaviour. In general, an increase in STT could potentially lead to a decrease in trading volumes for several reasons, primarily due to higher transaction costs, he stated.
Furthermore, an increase in STT may prompt investors to hold on to their securities for a longer duration to avoid incurring higher STT on frequent trading. This, in turn, could potentially lead to reduced trading volumes in the short term, noted Kumar.